Budget 2018 proposals Impacting Charitable/Religious Trusts

Present government is incessantly tightening the law to bring more transparency in the working of Charitable/Religious Trusts

Even the Finance Bill’2018 has proposed some dominant changes impacting trusts.

Mandatory Requirement for obtaining PAN for the fiduciary:

Section 139A is amended to propose that every person, not being an individual, which enters into financial operations of an amount of two lakh and fifty thousand rupees or more in the financial year shall be needed to apply to the Assessing Officer for allotment of PAN.

2) The mandatory obligation of TDS Deductions:

At present:

There are no examine on whether such trusts or institutions follow the provisions of deduction of tax at source under Chapter XVII-B of the Act.

This has led to an absence of an audit trail for confirmation of application of income.

Section 11 provides for indemnity in respect of earnings derived from property held under trust for charitable or religious purposes to the bound to which such income is applied or accumulated during the last year for convinced purposes by the relevant provisions.

Qualitative analysis:

Non-deduction of tax at source would now engage rejection for the charitable trust.

Thus, now trusts will be mandatorily required to deduct TDS as per provisions of Chapter XVII-B of the Act to claim expenditure as the operation of Income. Else the same will be taxable for Trusts.

3) Rejection of Expense exceeds Rs. 10,000/- in the form of Cash:

The provisions of section 40(3) and 40(3A) will be applied to the Trusts. Earlier, charitable trusts were availing profits even in respect of the application of income by cash payment.

This proposed modification is again in line with the idea of digital India and the cashless society. Thus, payment exceeding Rs. 10,000 in cash will not be treated as the application of income and will be taxable in the hands of trusts.

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